South Korea shuts Kaesong factory park, severing last tie with North

Dozens of South Korean trucks returned across the North Korean border on Thursday, laden with equipment and goods from the Kaesong Industrial Complex, after Seoul suspended operations there as punishment for the North's weekend rocket launch.

Halting activity at the park, where 124 South Korean companies employed about 55,000 North Koreans, cuts the last significant vestige of North-South cooperation - a rare opportunity for Koreans divided by the 1950-53 war to interact on a daily basis.

Isolated North Korea faces mounting pressure following what it says was a satellite launch on Sunday. Washington, among others, said it as a ballistic missile test, and like last month's nuclear test, a violation of United Nations resolutions.

The top military officers from the United States, South Korea and Japan agreed late on Wednesday to step up information-sharing and coordination of security efforts in light of increasing North Korean threats. Earlier, the U.S. Senate voted unanimously in favor of tougher sanctions.

Meanwhile, Associated Press, citing a South Korean official, reported that North Korean leader Kim Jong Un had executed his military chief. The report said that Ri Yong Gil, chief of the military's general staff, had been charged with corruption, abusing his power and forming a clique. The official told AP that the execution was part of Kim's attempts to bolster his grip on power in the isolated state.

Ri, an army general who took up the top military job in 2013, had been considered as one of Kim's trusted aides because he frequently accompanied his inspection tours of army units and factories.

Speculation about his fate flared after he missed two key national events in North Korea -- a meeting of senior ruling Workers' Party officials and a rally celebrating this week's rocket test.

A taste of life in the south

At the Kaesong complex, about 54 kilometres (34 miles) northwest of Seoul, North Korean workers were given a taste of life in the south, including snack foods like Choco Pies and toiletries that were resold as luxury items in the North.

They also rubbed shoulders with their managers from South Korea. Supporters of the project said that kind of contact was important in promoting inter-Korean understanding, despite concerns that isolated Pyongyang might have used proceeds from Kaesong to help fund its nuclear and missile programmes.

Except for Kaesong, both countries forbid their citizens from communicating with each other across the world's most fortified frontier.

"We piled up instant noodles, breads and drinks in our warehouse so North Korean workers could come here and eat freely," said Lee Jong-ku, who runs a firm that installs electrical equipment for apparel factories in Kaesong. "We don't mind them eating our food, because we only care about them working hard."

For the North, the revenue opportunity from Kaesong - $110 million in wages and fees in 2015 - was deemed worth the risk of exposing its workers to influences from the prosperous South. In recent years, North Koreans have had increasing access to contraband media, exposing them to life in the South and China.

Still, Pyongyang took precautions to ensure the workers it hand-picked for the complex had minimal contact with their South Korean managers that could be potentially subversive.

"These North Korean workers are strongly armed ideologically," said Koo Ja-ick, who was waiting on the south side of the border on his way to Kaesong, where he has worked at an apparel company for the past four years.

"They never act individually. They always work and move in a group of two, even manager-level people do so. They never go to the bathroom by themselves - always in groups," he said.

The average wage for North Korean workers at Kaesong was roughly $160 a month, paid to a state management company. The workers received about 20 percent of that in coupons and North Korean currency, said Cho Bong-hyun, who heads research on North Korea's economy at IBK Bank in Seoul.

A South Korean government official involved in North Korea policy said the decision was taken reluctantly, and that it was difficult to see how operations could be resumed anytime soon at Kaesong, which opened in 2005.

Despite volatile North-South relations over the years, Kaesong had been shut only once before, for five months in 2013, when North Korea pulled out its workers amid heightened tensions following its third nuclear test. Its future had often seemed uncertain over the past decade.

Lee, who runs the electrical gear installation firm, said a North Korean official expressed worry when he went to pay taxes last month, weeks after the fourth nuclear test.

"A North Korean officer there quietly asked me if Kaesong was going to be closed. And I said I don't know. And he said he thinks it will be closed, looking worried."

- CNBC contributed to this report.

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